Chapter 1 »
Introduction to Money and
Negotiable Instruments
The U.S.
Department of
Treasury has
Members trust their credit union to
take good care of their money. Your
credit union’s reputation rests on the
ability of employees to handle cash
transactions safely and accurately.
This chapter covers the basic facts
about U.S. currency and the features of
printed bills, both in newer and older
designs. It also explores how to identify counterfeit bills and what to do if
you receive suspicious currency.
played a central
Where Money Comes From
role in producing
The use of paper money in American commerce predates the founding of our country. A New England
colonial settlement printed the first
currency in 1690, and the Continental
Congress issued paper bills to finance
the Revolutionary War.
The U.S. Department of the Treasury and the Federal Reserve System
are the two federal government agencies responsible for the production,
distribution, and circulation of American currency.
currency since
the earliest days
of our nation.
The Department of the Treasury
The U.S. Department of Treasury
has played a central role in producing
currency since the earliest days of our
nation. However, the department’s
Bureau of Engraving and Printing
didn’t start printing all U.S. currency
until 1877. Here are some facts about
U.S. paper money:
Currency was standardized in 1929
with uniform portraits on the front;
emblems and monuments on the back.
Objectives
Upon completion of this chapter,
you will be able to:
1. Describe the roles of the U.S.
Department of the Treasury and
Federal Reserve in the monetary
system;
2. Identify the main design
features of the most common
denominations of printed
currency;
3. Explain the purpose of the various numbers and letters printed
on paper currency;
4. Describe security features
designed to make it easier to
identify counterfeit bills; and
5. List the steps to take when presented with currency that may
be counterfeit.
At the same time, the size of paper notes
was reduced by about 25 percent.
Through the years, paper notes have
ranged in denomination from $1 to
$10,000. In 1969, all notes greater than
$100 were retired because of declining
demand.
The most commonly used denominations in the United States are $1 and
$20 bills. About 45 percent of all notes
printed annually are $1 bills.
The U.S. Treasury doesn’t devalue
older currency as it introduces new
designs. A $20 bill issued in 1960 is
worth the same amount as a new $20
bill in commerce.
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Introduction to Money and Negotiable Instruments
Figure 1.1
A Short History of
U.S. Currency
1690
First paper currency issued in the Massachusetts Bay Colony to cover the costs of military expeditions.
1764
The British government completely bans the printing of paper currency in its American colonies.
1775
The Continental Congress issues paper currency to cover the cost of the Revolutionary War. It became largely
worthless due to easy counterfeiting and poor backing.
1785
Congress adopts the dollar as the official currency of the United States of America.
1791
The nation’s first central bank, the Bank of the United States, is chartered for a 20-year period and renewed for a
second 20-year charter in 1816.
1792
The Coinage Act of 1792 creates the U.S. Mint and sets the values for all coins containing precious metals.
1861
Marks the first general circulation of paper money by the federal government conducted to finance the Civil War.
These bills obtained the nickname “greenbacks” due to the distinctive green ink used on the backs of the notes.
1865
The U.S. Secret Service was created to fight rampant counterfeiting and restore confidence in U.S. paper
currency.
1877
U.S. Treasury Bureau of Engraving and Printing becomes responsible for printing all U.S. currency.
1913
Federal Reserve Act creates the U.S. Federal Reserve as the nation’s central bank, responsible for adjusting the
federal interest rate in response to economic fluctuations.
1929
Currency design is standardized.
1996, 1999, Currency undergoes first major redesigns since 1929 using 21st-century technologies to make it more difficult
2003, 2004, to counterfeit.
2006, 2008
The Federal Reserve System
While the Treasury Department
prints money, the Federal Reserve System issues currency and coins and puts
money into circulation throughout
the country. The Federal Reserve was
founded in 1913 as the central bank
of the United States. Its purpose is to
regulate the flow of money and credit
for economic stability and growth.
The Federal Reserve System, often
casually referred to as “the Fed,” consists of 12 banks, each serving a specific geographic district. When a credit
union needs to add to its supply of currency and coin, it places an order with
the Federal Reserve Bank in its district
or with a commercial bank. The Federal Reserve, or Fed, charges the face
value of the ordered cash to the credit
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union’s account at that Federal Reserve
Bank. When a credit union has excess
currency, it returns the cash to the
same bank and receives a credit on its
account. In addition to circulating currency, the Fed administers the nation’s
systems of clearing checks.
In which Federal Reserve district is
your credit union located? (figure 1.2)
You may often read or hear about
the Federal Reserve in the news because
it sets key interest rates that affect the
economy. The central banking system
plays a critical role in American commerce, regardless of whether people pay
with cash, check, or credit.
The Future of Money
As Americans rely increasingly on
debit and credit cards, will we see a
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Introduction to Money and Negotiable Instruments
Figure 1.2
Federal Reserve
District Map
“cashless society” some day? While
it’s true that Americans currently use
far less cash than they once did, it’s
unlikely it will fall completely out of
use. Using cash remains a common
and convenient way to make purchases. Unlike debit and credit cards, cash
is accepted everywhere. Some people
prefer to pay in cash because it ensures
their privacy—they don’t have to give
their name or show identification.
Because currency will be around for
some time to come, it’s important that
you become familiar with its design
and security features.
Currency Design
As a credit union employee, you
must be familiar with the designs and
features of U.S. currency. Paper money
has undergone many design changes
over the past decade, but the older
versions of these notes remain in circulation. The Federal Reserve removes
bills with older designs from circula-
tion as they wear out, but you will still
occasionally encounter those bills, so
you must be able to identify them as
authentic currency.
The three types of notes currently in
circulation are Federal Reserve notes,
Silver Certificates, and U.S. notes. As
you can see in figure 1.3, each type of
note is labeled at the top center of the
bill. Federal Reserve notes account for
more than 99 percent of currency now
in circulation, so we’ll focus on those
notes in this section.
New Design and Security Features
Largely to foil counterfeiters, new
security features were added during a
major redesign of Federal Reserve notes
in the 1990s. The Bureau of Engraving
and Printing unveiled its most recent
redesign, with even more sophisticated
security measures, beginning in 2004.
New $10, $20, and $50 series began
circulating in 2004, and a new $5 bill
was introduced in 2008. A new $100
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Chapter 1 »
Introduction to Money and Negotiable Instruments
PLAY PAGE
Go to the Play Page and view the
evolution of the five dollar bill.
Reminder:
To access the Play Page, go to http://training.cuna.org/playpage/index.html
or go to www.cuna.org and type “Play Page” into the Search Box.
Select the title of this module, and then the chapter you want to review.
bill is scheduled to be unveiled in 2009.
Because the $1 and $2 bills are rarely
counterfeited, the Treasury Department doesn’t plan major redesigns of
those denominations.
A closer look at figure 1.3 reveals the
major design features of American bills.
The front portraits and back designs
are the largest, most obvious features
on Federal Reserve notes. A different
portrait and back design appears on
each denomination. As you review these
designs, notice that all portraits face
toward the right, except one—Alexander
Hamilton, on the $10 bill.
One Dollar Bill
George Washington’s portrait is on
the front of the $1 bill, and the Great
Seal of the United States is on the back.
You can remember that George Washington is on the $1 bill because he was
our nation’s first president.
Two Dollar Bill (Series 1995)
Thomas Jefferson’s portrait is on the
front of the rarely seen $2 bill; the signing of Declaration of Independence—
which he helped write—is on the back.
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Five Dollar Bill (pre-1999)
Abraham Lincoln’s portrait is on
the front of the $5 bill and the Lincoln
Memorial is on the back. Just remember Lincoln on front, Lincoln on back.
Ten Dollar Bill (pre-1999)
Alexander Hamilton’s portrait is on
the front of the $10 bill and the U.S.
Treasury Building is on the back (pre1999). You can remember this one
because Hamilton was the first Secretary of the Treasury and his portrait is
the only one facing left.
Twenty Dollar Bill (Series 2004)
Andrew Jackson’s portrait is on
the front of the $20 bill and a picture
of the White House is on the back.
Ironically, Andrew Jackson—who during his presidency was an opponent
of printing paper money—has been
memorialized on the front of one of its
most common denominations.
Fifty Dollar Bill (Series 1996)
Ulysses S. Grant is on the front of
the $50 bill and the U.S. Capitol building is on the back. It might help you
to remember Grant is on the $50 bill
because as a general in the U.S. Army,
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Introduction to Money and Negotiable Instruments
Activity 1.1
Know the Roles
Match the function to the correct organization.
a. Prints and mints paper notes and coins for distribution by the Federal Reserve
b. Receives currency from and deposits it with the Federal Reserve
c. Distributes currency among the financial institutions
_____ 1. Federal Reserve System
_____ 2. U.S. Treasury Bureau of Engraving and Printing
_____ 3. Your credit union
Draw arrows among these three institutions to show how the money flows back and forth:
U.S. Treasury
Your Credit Union
Federal Reserve System
Answers appear in appendix A.
Grant fought in the Civil War to preserve the Union which went on to
include 50 states.
One Hundred Dollar Bill (Series 1996)
Benjamin Franklin is on the front of
the $100 bill and Philadelphia’s Independence Hall is on the back. The $100
bill’s nickname, the Benjamin; will help
you remember this one.
Memorizing the primary features of
the fronts and backs of bills will help
you identify forgeries and alterations.
As you review notes, think about connections with history to help remember these common currency features.
Details of the New Designs
The faces on the front and the images
on the back of Federal Reserve notes
have not changed over time, but they are
modified in the new designs. The portraits are larger and printed to the left of
center on the most recent designs. That
shift has a practical purpose: You can
now see the portrait even when the bill
is folded, and the image is subject to less
fading and creasing from being folded.
The most obvious change in the
2004 series is that the frames and fine
lines around the portraits on the front
and vignettes on the back have been
removed, and colored details have
been added. We’ll discuss the addition
of new colors in the section on battling
counterfeiters.
Visit this link to see a comparison
of the older and new $5, $10, and $20
designs: http://titanium.webcourse
works.com/clients/cuadvance/A1024A/
pdf/design5.pdf
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Chapter 1 »
Figure 1.3
Introduction to Money and Negotiable Instruments
$1 Bill
Your Guide to
Bill Designs
$2 Bill (Series 1995)
(continued on next page)
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Figure 1.3
Introduction to Money and Negotiable Instruments
$5 Bill (pre-1999)
Your Guide to
Bill Designs
(continued)
$10 Bill (pre-1999)
(continued on next page)
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Chapter 1 »
Figure 1.3
Introduction to Money and Negotiable Instruments
$20 Bill (Series 2004)
Your Guide to
Bill Designs
(continued)
$50 Bill (Series 1996)
(continued on next page)
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Chapter 1 »
Figure 1.3
Introduction to Money and Negotiable Instruments
$100 Bill (Series 1996)
Your Guide to
Bill Designs
(continued)
Another prominent feature on the
Federal Reserve note is the Treasury
seal. The seal is displayed to the right
of the portrait on both the older and
newer versions of paper currency.
The denomination of the bill is superimposed over it in capital letters:
ONE, TWO, FIVE, TEN, TWENTY,
and FIFTY. The exception is the $100
bill, which lists the denomination in
numerals.
The color used for the treasury seal
differs, based on the type of note. The
Treasury seal is green on Federal Reserve
notes. It is printed in red on U.S. notes
and blue on silver certificates.
We examine how the various bills
are marked with their denomination
and other important identifying numbers in the next section.
By the Numbers:
Denomination
Numbers and other forms of identification serve various purposes in U.S.
currency. This section examines the
purpose and locations of these details:
• Denomination;
• Federal Reserve Seal, letter, and
number;
• Series;
• Serial number; and
• Check letter, quadrant number,
face plate, and back plate numbers.
All paper notes have the denomination written in words and/or numerals
in several places. For example, on the
$1 bill, the denomination appears as
a numeral in eight locations, in written form eight times. The series 1999
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Introduction to Money and Negotiable Instruments
Activity 1.2
Characteristics of
Currency
Match the description with the correct answer (not all answers will be used).
_____ 1. The portrait on the front of the rarely seen $2 bill depicts
this founding father.
a. Treasury seal
_____ 2. The denomination of each bill is superimposed over this
image on the front panel.
c. U.S. Capitol
_____ 3. The new version of this bill was the first to be unveiled in
the latest series.
e. Andrew Jackson
b. Alexander Hamilton
d. $10 bill
_____ 4. This image is on the back of the bill featuring our first
president.
f. Silver certificates
_____ 5. The Treasury seal is printed in blue on these notes.
h. Benjamin Franklin
_____ 6. The U.S. Treasury Building is printed on the back of
this bill.
i. $1 bill
_____ 7. This president’s portrait is on the front of both the older
and newer $20 bills.
k. Great Seal
g. The White House
j. $100 bill
_____ 8. Because this bill is rarely counterfeited, no redesigns are
planned.
l. Thomas Jefferson
_____ 9. This portrait on the $10 bill is the only one that faces left.
n. $20 bill
m. Lincoln Memorial
o. George Washington
Answers appear in appendix A.
$5 bill shows the denomination in
numeric form in eight locations and in
written form in three places.
On new note, a low-vision feature
has been added. In the lower right of the
back side, the denomination appears as a
large dark numeral against a light background, which makes it easier to read.
A machine-readable feature has been
incorporated on the new $5, $10, and
$20 notes to assist people who are sightimpaired. The attribute will facilitate
development of scanning devices that
can identify the note’s denomination.
Federal Reserve Seal,
Letter, and Number
The Federal Reserve seal is to the
left of the portrait. Prior to the 1996
redesign, Federal Reserve notes bore a
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p. Federal Reserve note
regional Federal Reserve seal, but that
has been replaced with one that represents the entire Fed system.
On older bills, the regional seal
indicates which Federal Reserve Bank
issued the currency. For example, the
seal in the example shown in figure 1.4
designates the Federal Reserve Bank
of Chicago. The G in the center of the
seal refers to the Chicago bank, which
is the main bank of the Fed’s seventh
district. G is the seventh letter of the
alphabet. Figure 1.6 shows which letter
designation corresponds to which Federal Reserve Bank District number.
The word series followed by a date
indicates the series year—that is, the
year the note design was first used. As
you can see in this example, the series
identification on the new $5 note is
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Introduction to Money and Negotiable Instruments
Figure 1.4
Examining Federal
Reserve Seals
Regional Seal (older)
to the lower right of the portrait. The
series appears in different places in the
series 1996, 1999, and 2004 notes.
From time to time, the Treasury
Department changes the design of a
bill and starts a new series, as it did in
2004 and 2008. Sometimes changes are
minor. When the president appoints
a new Secretary of Treasury, that person’s signature appears on the face
of bills printed during the secretary’s
term. This results in a new series.
When a new secretary is appointed in
the middle of a year, a letter is added to
the series year, as in 2003A.
Remember, two bills of the same
denomination may not be perfect matches, but it doesn’t mean one is counterfeit.
They may come from different series.
Serial Numbers and Series
The Treasury Department assigns a
unique serial number to each Federal
Reserve note of the same denomination and series. That is, no two Federal
Reserve notes of the same denomination ever have the same serial number.
On series 1996, 1999, 2004, and 2008
notes, the serial number appears in
green above the Federal Reserve seal
Universal Seal (newer)
on the left side of the front (see figure
1.6) and below the Treasury seal on the
right front.
In the example, the serial number
starts with “A”, which designates the
series. “A” stands for Series 1996. The
next letter stands for the issuing Federal Reserve Bank, in this case “B” for
New York—which corresponds to the
Federal Reserve indicator below the
serial number. After the two letters
come eight numerals, usually followed
by a letter. See figure 1.7 for a quick
guide to the serial numbers on different editions of paper money.
The Bureau of Engraving and Printing adds other codes on the front and
back plates of currency to identify
the specific placement of the note on
the plate during the manufacturing
process. These codes are useful to the
Secret Service in detecting counterfeit
currency, and you’ll need to include
them if you ever report suspected
counterfeit bills.
The Check Letter
and Quadrant Number
Locate these codes on figure 1.8, an
example of a pre-1996 bill:
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Chapter 1 »
Introduction to Money and Negotiable Instruments
Figure 1.5
District Bank
Designation
Federal Reserve District Bank Designations
Bank
Letter Designation
District Number
Boston
A
1
New York
B
2
Philadelphia
C
3
Cleveland
D
4
Richmond
E
5
Atlanta
F
6
Chicago
G
7
St. Louis
H
8
Minneapolis
I
9
Kansas City
J
10
Dallas
K
11
San Francisco
L
12
• The check letter and quadrant
number appear below the denomination number in the upper left
corner on the face of the bill.
• The check letter and face plate
number are on the front right side.
These codes appear in different locations on different denominations in the
newer note designs.
The back plate number appears in
tiny print in the lower right corner of the
white space area. This is an approximate
location for all Federal Reserve notes.
The series 1996, 1999, 2004, and
2008 bills incorporated a number of
additional identifying features beyond
the numbering and code systems discussed in this section. We look at those
features in the next section about the
battle against counterfeiting.
Complete activities 1.3 and 1.4 to
see how detail-oriented you are when it
comes to paper money.
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The Battle Against
Counterfeiters:
The Impact of Counterfeiting
Because counterfeiting dilutes the
value of money, it’s a crime that harms
our entire economy and society. Counterfeiting has a long history in the United States. At the end of the Civil War,
one third of the currency in circulation
was estimated to be counterfeit.
The U.S. Secret Service was formed
in 1865 to combat counterfeiting.
Today, the Secret Service reports that
only 0.0003 percent of bills in circulation are phony, but that still amounts
to millions of dollars.
Anti-Counterfeiting Features
With the widespread availability
of digital scanners and color copiers
today, counterfeiting is easier than it
once was. The Secret Service reports
that many of the counterfeit bills
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Figure 1.6
Seeing the Seal
Number
passed off as real were generated with
computers and inkjet printers. The
agents involved with tracking down the
source of the counterfeit money have
dubbed the bills “P-notes.”
Some of the features and materials used in new currency designed to
thwart counterfeiters are:
• Paper texture and fibers;
• Portrait printing quality;
• Printing details;
• Security thread;
• Microprinting;
• Watermark; and
• Color features.
To learn more about the crime of
counterfeiting, visit the Web site of the
U.S. Secret Service: www.secretservice.
gov/money_technologies.shtml
We call it “paper money,” but American currency is not made from wood,
like most paper. It is actually printed
Figure 1.7
A Quick Guide to
Serial Numbers
Series 1996, 1999, 2004, and 2008
Older Federal Reserve Notes
Where does the serial number appear? Above the Federal Reserve seal on the
left front and below the Treasury seal
on the right front
Below the Federal Reserve seal on the
left front and above the Treasury seal
on the left front
How does the serial number begin?
With two letters: the first indicates
the series; the second indicates the
issuing bank
With one letter indicating the issuing
bank (corresponding to the letter in the
Fed seal)
How many numbers follow the initial
letter(s)?
Eight, usually followed by a letter
Eight, ending with a letter
In what color is the serial number
printed?
Green
Green
Are there any exceptions?
A star note is a Federal Reserve note with a serial number ending with a star
indicating that an error was made in the money-printing process or that the note
was damaged during its production.
Damaged notes must be destroyed.
To keep an accurate count of bills printed in a series, the destroyed bills must be
replaced. Printing a replacement note with an identical serial number to that of
the damaged note would be costly and time-consuming.
A more cost-effective solution is to replace the final letter of the new note with
a star. Star notes are produced in one other situation, and that is when the 100
millionth note is printed. A serial number has eight numerals, but notes are numbered in lots of 100 million, and the number 100 million has nine digits. When
the 100 millionth note is printed, it becomes a star note.
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Introduction to Money and Negotiable Instruments
Figure 1.8
Letter, Quadrant,
and Plate Numbers
Check letter and quadrant number
on a blend of cotton and linen specifically formulated for the government.
This cotton paper has a distinctive, pliable feel. Because counterfeit bills often
have a waxy or smooth feel compared
to genuine currency, detecting a difference in texture may indicate that a bill
requires further examination.
Tiny red and blue fibers are embedded in this cotton paper, but these
fibers may be hard to see on older,
worn notes. Counterfeiters try to
replicate these fibers by printing tiny
red and blue lines, but if you look
closely, you should be able to see that
they’re printed on top of the paper, not
embedded in it.
The Bureau of Engraving and Printing uses a secret formula of ink to print
notes as another way to prevent counterfeiting. Some people believe that if the
ink comes off when you rub a bill, it’s a
counterfeit, but this is not a reliable test.
Printing Details
On a genuine note, the portrait
looks lifelike, and the details of printing appear crisp and stand out from
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Check letter and face plate number
the background. The portrait on a fake
bill often looks lifeless and flat. Can
you see the differences in these side-byside comparisons in figure 1.9?
Other details include:
• Real currency has clear, distinct
sharp teeth on the Treasury seal
and the pre-1996 regional Federal
Reserve seals. The universal Federal Reserve seal used on more
recent notes has no teeth.
• The border on a real bill has fine,
clear, unbroken lines. On a fake
bill, those lines may be blurred and
indistinct.
• Serial numbers on a genuine Federal Reserve note are evenly spaced
and printed in green, just as is the
Treasury seal. On counterfeit bills,
the serial numbers may differ in
colors, shades, and spacing.
Also, check to ensure that the serial
numbers differ on each suspicious bill.
Counterfeiters may print the same
serial number repeatedly.
The Security Thread
The security thread, an embed-
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Introduction to Money and Negotiable Instruments
Activity 1.3
All in the Details
1.
2.
3.
5.
4.
6.
7.
8.
Identify the features on this new $5 bill by inserting the term’s corresponding letter into the numbered boxes.
a. Denomination
e. Treasurer of the U.S. signature
b. Federal Reserve seal
f. Issuing Federal Reserve Bank identifier
c. U.S. Treasury seal
g. Secretary of the Treasury signature
d. Serial number
h. Series
Answers appear in appendix A.
ded polymer strip, first appeared in
the series 1990 notes and remains in
use in all series printed since then. In
the series 1990, 1993, and 1995 notes,
the thread’s position is to the left of
the Federal Reserve seal. In the $5,
$10, and $50 notes introduced in 2004
and 2008, the security thread has been
moved to the right side of the portrait.
The $1 bill has no security thread.
The thread is visible from the front
and back when you hold the bill up to a
light. It contains the letters “USA,” followed by the denomination in a repeat-
ing pattern. The threads in the new $10,
$20, and $50 bills also feature a small flag.
Under ultraviolet light, the security
thread on series 1996, 1999, and more
recent notes glows a distinctive color
for each denomination:
• $5 is blue;
• $10 is orange;
• $20 is green;
• $50 is yellow; and
• $100 is red.
Test your color-coordinating abilities in activity 1.5.
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Introduction to Money and Negotiable Instruments
Activity 1.4
Paper Money
Choose the best answer to the following questions.
1. What numbers appear in the four corners on the front and
back of bills?
6. What codes are printed on the bills to indicate specific
placement in the manufacturing process?
a. series and issuing Federal Reserve Bank
a. series
b. serial number
b. denomination
c. check and quadrant number
c. check letter and quadrant number
d. denomination
d. series and issuing Federal Reserve Bank
2. What appears to the left of the portrait on the front panel
of printed currency?
7. To what do the two letters beginning the serial numbers on
series 1996 and 1999 notes refer?
a. star at the end of the serial number
a. Federal Reserve seal
b. Federal Reserve seal
b. issuing Federal Reserve Bank
c. series
c. series and issuing Federal Reserve Bank
d. serial number
d. series
3. What does the letter inside the Federal Reserve seal on the
old bills represent?
8. How do you identify a note that has been printed to replace
a bill damaged in production?
a. issuing Federal Reserve Bank
a. star at the end of the serial number
b. denomination
b. Federal Reserve seal
c. series
c. check letter and quadrant number
d. series and issuing Federal Reserve Bank
d. letters that begin the serial number
4. What is the eight-number code appearing in two places on
the front of a bill?
9. What type of notes do not include the Federal Reserve
seal?
a. check letter and quadrant number
a. denomination
b. issuing Federal Reserve Bank
b. Federal Reserve seal
c. series
c. series
d. serial number
d. U.S. Notes and Silver Certificates
5. What number indicates the date of the bill’s design?
a. serial number
b. series
c. check letter and quadrant number
d. issuing Federal Reserve Bank
Answers appear in appendix A.
Microprinting
Another anti-counterfeiting feature
added in 1990 is microprinting, which
is extremely small printing visible only
with a magnifier. The details of this tiny
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print disappear when a bill is copied
or scanned. Viewed by the naked eye,
microprinting appears to be a thin line.
As one example of microprinting,
the series 1990, 1993, and 1995 notes
(excluding the $10 note) contain “THE
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Figure 1.9
Picking Apart
Portraits
Genuine
Counterfeit
UNITED STATES OF AMERICA”
printed repeatedly in a line just outside
the portrait frame.
Watermarks
Moving the portrait off-center,
beginning with the series 1996 and
1999 notes, created room for another
new security feature: a watermark.
This is created during the papermaking process and is difficult for
counterfeiters to replicate. On the
various denominations, the watermark
depicts the same figure as the portrait
and is visible from either front or back
when the note is held up to the light.
Counterfeiters sometimes try to
reproduce the watermark effect by
printing it in light gray. A true watermark is barely visible when the note
is laid flat but becomes much clearer
when it is held up in front of a light.
Color and Coins
Color is a final tool in the arsenal
against counterfeiting. “Greenbacks”
are getting a new look with color features such as a color-shifting number
in the lower right corner of the front
and colorful backgrounds and symbols.
Counterfeit coins may be manufac-
tured, or they may be altered genuine
coins. Real coins are minted or stamped
out by special machinery, while counterfeit coins are usually manufactured
by pouring metal into a mold or die. Die
marks, cracks, or pimples of metal on
the coin are signs of counterfeiting.
Genuine dimes, quarters, half-dollars,
and dollars have corrugated edges with
straight, evenly spaced ridges. Also,
dimes and quarters minted since 1965
have an inner copper layer, easily visible
when you look at the coin’s edge.
Due to coins’ relatively small monetary value, they are seldom counterfeited
for spending purposes. Most counterfeit
coins today are made by altering authentic coins, such as changing the date or
mint mark with the aim of increasing the
coin’s value to collectors.
Complete activity 1.6 to see how
well you understand these protective
measures.
Dealing with Suspicious
Currency:
Look for the Differences
A key guideline for evaluating
whether currency is counterfeit can be
summed up in one simple rule: Look for
the details. Counterfeiters go to great
pains to make fake money look real. It’s
the differences in the details that can tip
you off to counterfeit money.
Remember these helpful security
checks when determining whether
currency is genuine or forged:
• Feel the bill. Authentic currency
has a distinctive, pliable feel, while
counterfeit bills are often waxy and
smooth.
• Look at the portrait. Is it lifelike,
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Introduction to Money and Negotiable Instruments
almost three-dimensional, and
the correct representation for this
denomination?
• Examine the watermark. Is it more
noticeable when held up to the
light or just a light image printed
on the surface?
• Make sure the color-shifting ink in
the lower right corner on the front
of $10, $20, and $50 bills actually
changes hue.
• Use special tools, such as a counterfeit marker and UV light, when
appropriate. The security thread
should glow in UV light.
Watch for Raised Notes
While some counterfeiters try to
produce fake bills, others attempt to
defraud by altering the value of real
money. Can you see what’s wrong with
the note in activity 1.7?
The counterfeiting method demonstrated in the activity indicates why it’s
so important to pay attention to portraits as well as more intricate security
features. Does the portrait match the
denomination? This may seem obvious,
but it can be easy to miss if you’re busy
or distracted.
Activity 1.5
Colors in Cash
Match the correct security strip color to the
corresponding bill:
___ 1. red
a. $5 bill
___ 2. blue
b. $10 bill
___ 3. yellow
c. $20 bill
___ 4. green
d. $50 bill
___ 5. orange
e. $100 bill
Answers appear in appendix A.
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When You Receive
Counterfeit Money
If you receive suspicious currency
at the credit union, don’t assume the
person who handed it to you is a counterfeiter. Most counterfeiters are professional thieves who are unlikely to risk
getting caught trying to pass off bogus
bills to a trained teller. The member
standing at your station is most likely an
unsuspecting victim who got the money
in a retail store or a restaurant.
When you receive suspicious currency, take these steps:
1. Don’t give it back to the person
who hands it to you. That would
be illegal.
2. Ask the member tactfully, courteously, and respectfully to wait.
It will be extremely helpful to
the Secret Service if the passer is
willing to wait and talk to them.
The passer may have information
about the money’s origins that
will help trace the counterfeiter.
3. Explain that you believe the
money is counterfeit and must be
turned over to authorities.
4. Issue a receipt, using your credit
union’s standard form to give to
members or other people who
hand over suspicious currency. If
your credit union doesn’t have a
standard form like this, suggest
that they make a form available to
their employees.
5. If the member refuses to wait,
write down a complete description of the person and any companions and, if possible, type of
vehicle and license plate number.
6. Handle the bill as little as possible
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Introduction to Money and Negotiable Instruments
Activity 1.6
Protections on
Paper Money
Identify each statement as True or False.
______ 1. A watermark will be almost invisible when not held up to the light.
______ 2. Microprinting is a commonly used counterfeiting method.
______ 3. On a fake bill, fine lines may be blurred and indistinct.
______ 4. If ink rubs off a note, it is a definite sign that the bill is counterfeit.
______ 5. The color-shifting ink on the new bills will change color under UV light.
______ 6. U.S. paper currency is actually printed on a special blend of cotton and linen.
______ 7. Two bills of the same denomination may have the same serial number.
Answers appear in appendix A.
to avoid obscuring evidence and
place it in an envelope or special
protective plastic sleeve for safe
keeping.
Read the scenario in activity 1.8
and complete the questions to see how
you’d respond to fraud.
The Secret Service has a standard
form to complete when reporting
suspected counterfeit currency which
can be found at www.secretservice.gov/
money_receive.shtml
An example of a form credit unions
use to issue receipts to members and
other people who hand over suspicious
currency can found found at http://
titanium.webcourseworks.com/clients/
cuadvance/A1024A/pdf/dealing4.htm
Summary
The United States currencies and the
government institutions responsible for
printing, distributing, regulating, and
defending it are continuously evolving along with the breakneck pace of
technological change. As a credit union
employee, you must be able to understand the different types of currency
and keep up with the changes in design
so that your customers can confidently
entrust their money into capable,
knowledgeable hands.
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Activity 1.7
Spotting a Bad Bill
While some counterfeiters try to produce fake bills, others attempt to defraud by altering the value of real money. Can you see
what’s wrong with this note?
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
Answers appear in appendix A
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Chapter 1 »
Introduction to Money and Negotiable Instruments
Activity 1.8
Responding to Fraud
Here is an example of a conversation between a credit union member and a teller who suspects one of the bills being deposited is counterfeit. Read the conversation and answer the questions that follow:
Member: Here is our daily deposit from the restaurant. Can I get a receipt?
Teller: No problem, Ms. Ward. Let me just total it up quickly … Ms. Ward, we may have a problem here. Would
you be able to wait here for a few minutes?
Member: I suppose, but what’s the problem?
Teller: I’m afraid this $20 bill is counterfeit. We’ll have to contact the authorities immediately and they’ll want to
talk to you.
Member: Counterfeit? Let me see that.
Teller: I’m sorry Ms. Ward, but I need to put this in an envelope for safe keeping. Let me show you to our waiting
area while I talk to my supervisor and talk to the authorities.
Member: Ok, but I don’t know anything about this. And I really should get back to work.
Teller: It would really be better if you waited, Ms. Ward. The agent will just have a few questions for you. In the
meantime, I can complete your deposit receipt, and I’ll give you a separate receipt for that $20 bill.
Member: Ok, I guess. But I should probably call the restaurant.
Teller: Of course, you can use the phone at our front desk.
Answer the following questions.
1. Did the teller correctly follow the six steps for dealing with suspected counterfeit currency? (Y/N) ___
2. Summarize your credit union’s procedures for handling currency that you suspect is counterfeit:
____________________________________________________________________
____________________________________________________________________
____________________________________________________________________
3. To whom do you report suspicious currency?
___ a. your supervisor
___ b. the local U.S. Secret Service field office
___ c. the FBI
___ d. both a and b
___ e. a, b, and c
Answers appear in appendix A.
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